Q: What have been Fresnillo’s key achievements in the last five years?
A: In 2019, we were just starting up the San Julian mine, which has now been consolidated into a major silver producer. We were also developing Juanicipio, which started operations in 2023 and it is now the principal asset among our operating mines thanks to its high-quality mineral deposits and significant silver production. Synergies within Fresnillo helped us process Juanicipio’s ore at both the Fresnillo and Saucito mines, generating cash flow and allowing us to avoid having an inactive asset. Our Pyrite Plant also started operations.
Another achievement has been maintaining our resources and reserves, representing 2.2 billion oz of silver and nearly 38Moz of gold. We also navigated other challenges, such as the high inflation that compressed our margins. We are working to recover our margins and take advantage of high prices by controlling and reducing costs. Finally, sustainability is always a priority. The company is committed to contributing to the well-being of communities and society through the sustainable mining of gold and silver.
Q: How has the increase in metal prices, especially precious metals, since 2019 impacted Fresnillo's strategy?
A: Exploration is one of our core pillars. We invest in exploration because it represents the future of the company through various industry cycles. This pillar focuses on two main areas. First, we invest strongly in the exploration and development of our own deposits every year. We explore and develop about 140km annually to prepare production stocks and maintain production levels.
Second, we invest in greenfield exploration to ensure we have new projects in our portfolio for future development. Overall, we invest between US$160 million and US$190 million annually in exploration.
Q: What specific opportunities or strategies does Fresnillo foresee for future joint ventures and partnerships in the coming years?
A: We have been fortunate to have successful joint ventures with other world-class companies, including Herradura, Nochebuena, and Soledad-Dipolos. A successful joint venture requires partners to have complementary capabilities. For about 15 to 16 years, we had a joint venture with Newmont, which has been one of our most successful in terms of margins. This successful joint venture concluded when we purchased Newmont's 46% stake in Penmont in 2015.
Our joint venture with MAG Silver follows this philosophy. The Juanicipio concessions initially belonged to MAG Silver. We reached an agreement through which, by investing a certain amount and exploring MAG Silver's concessions, we could earn a 56% stake. We achieved this and now Juanicipio stands as our highest-performing mine.
Fresnillo has a broad portfolio of properties. Some of them are not large enough to meet our objectives, which provides us with various alternatives. We can sell these smaller projects or form partnerships to combine capabilities with other partners. This strategy helps us reduce risks, especially for capital-intensive or technologically demanding projects, and allows us to maximize the potential of these projects in the shortest time possible.
Q: What future M&A opportunities do you see in the Mexican mining industry?
A: Many companies, including Fresnillo, are looking to add dynamism to their portfolios. Demand for certain metals is increasing in the transition to greener energies. Silver, for example, has increased in demand as there has not been much growth in silver supply over the past 10 to 12 years.
Fresnillo experienced significant growth from 2008 to 2018, at a rate of almost 8% compounded annually. However, we reached our peak and our mines matured. This, coupled with decreasing ore grades, has led to a decline in production over the last three to four years. Looking ahead, supported by the increasing value of silver and other metals in the transition to greener energies, we believe there are strong prospects for future growth. We hope for and are optimistic about a rebound in metal prices driven by market fundamentals and supply deficits, which would allow us to bring new projects into our portfolio and contribute to producing the metals society needs.
Q: As Mexico’s largest silver producer, what is Fresnillo’s impact on the national economy, silver output, and the communities where it operates?
A: Although we have had higher production in the past, we produced 56Moz of silver and just over 600,000oz of gold in 2023. In the coming years, production is expected to remain at similar levels until we bring projects like Rodeo, Orisyvo, Tajitos, and Guanajuato into operation. Once these projects are operational, we expect to exceed the production levels we had in 2018, which were our highest.
Our contribution to the community amounts to about US$2.6 billion in salaries, taxes, and payments to suppliers. This wealth generation benefits all stakeholders involved in mining, including surrounding communities.
Q: What is the status of Fresnillo’s advanced exploration projects Orisyvo, Guanajuato, Rodeo, and Tajitos?
A: Orisyvo is in the pre-feasibility stage, which we expect to conclude in the next few months. After that, it will move on to the feasibility stage. Orisyvo is a challenging project located in the Raramuri Sierra Madre, Chihuahua, requiring significant investment in infrastructure and camps to establish mining operations. It will take several more years to complete.
Rodeo, located in Durango, is progressing as we have reached agreements with local communities and ejidos, allowing us to advance from exploration to converting resources to reserves. Tajitos, located in Sonora, is also advancing its exploration activities and we expect to move to the feasibility stage soon. The Guanajuato project is an important discovery in a historic mining district, which marks the origins of Peoles and Fresnillo. We are pleased with its potential and are advancing through the pre-feasibility and feasibility stages.
Our approach to growth includes stringent controls and considerations to ensure the long-term sustainability of our projects, recognizing the cyclical nature of the mining industry. Over the past 16 years, Fresnillo has more than doubled its silver production and tripled its gold production. Even during the downturns in metal prices, our projects continued to operate, unlike many other global mining operations that halted projects initiated during peak price periods in 2010-2011. We have a competent technical team focused on evaluating the viability of our projects to ensure their long-term operation.
Q: How is the company advancing its strategy to source 75% of its energy from clean sources, and who are its main allies in this endeavor?
A: We maintain the goal of obtaining 75% of energy from renewable sources, specifically wind power, by 2030. In 2023, we closed with over 50% of our energy consumption coming from wind sources. We are also reducing our carbon footprint through other means. For example, at Herradura, we are pioneering a dual system in our trucks alongside Caterpillar that uses both diesel and liquefied natural gas, reducing our carbon footprint. This demonstrates that sustainability efforts not only contribute to broader societal goals but also can generate value and positive returns beyond environmental benefits.
Q: What initiatives does Fresnillo employ to collaborate with industry stakeholders to strengthen Mexico’s mining value chain?
A: Our suppliers are key stakeholders with whom we maintain a long-term vision, aligning our ESG values and goals. We seek reliable partners who share our values and direction, collaborating closely on sustainability initiatives. This approach is crucial in the mining industry, where a long-term perspective is essential.
We also place great importance on our relationship with the communities where we operate. We have a range of programs that contribute to health, education, and sustainability in these communities. We offer entrepreneurship courses and generate value for communities through our operations. Over 70% of our suppliers come directly from the region where we operate, and we aim to develop their capacities to ensure they can sustain their livelihoods even after our mines are depleted. Some of the suppliers we support even provide their services in other states, generating value throughout the whole mining value chain.
Q: How does Fresnillo communicate its value propositions, and that of the mining sector, to other industries?
A: The ultimate goal is for society as a whole to have a greater appreciation for every one of the metals we produce. We need to change the message from "mining does not contribute to the value of the communities where it operates, it simply pollutes" to a message that recognizes the minerals produced as essential for everything society requires. Metals produced by the mining industry are part of everyday products used in construction, in cellphones, and in green energy generation, among many other areas.
Fresnillo is the world's largest silver producer and Mexico's largest gold producer. It operates eight mines in Mexico: Fresnillo, Saucito, Juanicipio, Cinega, Herradura, Soledad-Dipolos, Noche Buena, and San Julin. It is also engaged in advanced exploration projects.